So I would need to see some studies on this, but I have a suspicion as to what is causing the supply and demand denial to kick in for housing.
In my personal life, I've noticed many people deny supply and demand for Healthcare as well. The idea that if we reduce diseases by 90% and also quadruple the number of Healthcare providers, the price of Healthcare services would not change at all. The people I have seen believe this are not stupid.
What I think is happening is that humans want problems to have easily identifiable villains. Healthcare and housing are definitely problems today. Because of that, people are defaulting to thinking there must be a "bad guy" out there causing it. I think this is why populism is so enticing as a political strategy as it plays into that natural tendency to blame problems on some specific out group (corporations, immigrants, ethnic minorities, etc.) Instead of systemic issues. Supply and demand unfortunately doesn't have some obvious villain that can be pointed out.
I would love these economists to try the same thing with Healthcare to see if my suspicion is correct and the supply and demand denial kicks in there as well. If anyone likes this comment, try it in your personal life and see what happens.
Ah yes I have read this paper before and now I see they did discuss that.
I think using the healthcare comparison is a good way to test the hypothesis that housing supply and demand denial is downstream of a need for a villain. After all, people absolutely are as angry about healthcare as they are housing. People aren't angry about cars, steel, or plumbing services so they accept supply and demand.
For me with a sample size of about 10, I only had 2 people accept that supply and demand applies to Healthcare services. Eerily similar to housing. Unfortunately I'm just one man so don't know if this generalizes. Would love if these economists did a paper on it as well.
All true, but the complication with healthcare is that the consumer (the patient) doesn’t usually directly pay for their healthcare. A single payer system doesn’t change that. What’s the incentive for quadrupling the number of providers? And what’s the mechanism for reducing the level of illnesses? If both could be an accomplished, perhaps healthcare would become affordable without the need for insurance. But unless that becomes a realistic possibility, I’m not sure it’s irrational to believe that the law of supply and demand has no practical application to healthcare.
- expand access to GLP1 medications to reduce incidence of obesity thereby reducing incidence of arthritis, diabetes, etc.
- automated vehicles reducing frequency of car wrecks thereby reducing number of people crippled.
Expanding number of providers:
- increase scope of services PAs and NPs can provide
- expand number of funded residency spots.
- lower required training to practice medicine
- allow more healthcare providers to immigrate.
These would place downward pressure on the cost of Healthcare services. Although due to price opacity and the insurance system, I concede it may be less than anticipated.
But supply and demand applies to the services of a dermatologist or a surgeon the same as it does the services of house cleaners and electricians.
Yup, the private equity boogeyman who’s buying up all this housing and then just sitting on it. People are fundamentally unserious about a lot of this stuff.
Activists in oakland have argued that what is causing homelessness is rich people and private equity sitting on 2nd and third homes and we don't actually need to build new housing at all.
From my experience, the people with the most power to block new housing (politically active homeowners) are the same group of people that do not directly experience the impact of new housing being blocked (they are locked into their mortgages and/or have paid them off) and do experience the negatives of building new housing (traffic, parking, change to the communities they've lived for decades). It is why california has had to override local control. There is no real incentive for homeowners to allow new construction.
Thats part of the housing crisis. Restricting construction has concentrated benefits but diffuse costs. My comment was about another issue behind the housing crisis, the widespread denial of supply and demand.
Both issues are part of why housing is such a mess.
Yeah. I know about this Rao’s stuff because Paul Freedman in the history department told me he went there. He said the food was alright but you’re mainly paying for the vibe + the flex of getting to say you got to go to Rao’s.
Anyways they apparently started selling the jarred sauce several decades (or maybe even a century) after the restaurant opened.
I'm not sure how prominent the "transplant" discourse is anywhere else, but in NYC, my hometown and the place I plan to spend the rest of my life, it has become equal parts toxic and delusional.
It seems that large swaths of people, and many of them self-identified progressives, are absolutely convinced that the sole cause of housing prices spiraling out of control is people moving here from other places in the US.
Now, of course just like any other form of demand shock, yes, people moving to NYC will tend to increase housing prices ceteris paribus. But given that the NYC population has been stagnant-to-declining in recent years, this explanation collapses under the most basic form of scrutiny.
More importantly to me though is the fact that it seems like nothing but a deflection away from the actual most important cause: we simply do not build enough. Not for the natives, not for the "transplants," not for the poor, not for the working class, not for anyone. I mean, what is the solution the "transplant" haters even propose? Build a wall around New York City?
That would obviously unconstitutional, but even if we set that aside, have they taken a cursory glance at the data emanating from cities that can't attract new residents? You know all the things you like about New York City? The restaurants, bars, public transit system, etc.?
Guess what--they are dependent on economic growth, and that means you don't get to ban someone from Ohio who wants to come spend money in NYC from doing so. These folks tend to understand that Donald Trump's form of nativism is unethical and economically illiterate, yet they think if you just shrink the size of the polity in question all of the sudden his cockamamie economics pencil out.
I know this comment may seem unresponsive to the article, but I want to highlight that I think this discourse exists as a kind of rhetorical shield against grappling with our pitiful efforts to make supply meet demand.
Bludgeon "transplants" all you want (and by the way, the idea that native New Yorkers don't also move into neighborhoods that are economically and logistically convenient for them is laughable), but you can't have a thriving city solely on the backs of people born in particular zip codes.
To attempt to tie all my rambling together, in my experience the people who who engage in this tiresome discourse are also the first to complain about new development. I'd like to hear them articulate their Plan B for housing prices once they find out you can't actually stop your fellow American citizens from freely moving within the country.
I think this is a good comment, have some gold 🏅. I, too, hate hearing all the discourse around how “transplants” or “newcomers” ruined everything, driving out current residents and generally just not being as cool as long-timers. It really, really IS Trumpian nativism discourse writ much smaller.
Honestly I think there are progressives who secretly would love something like a hukou policy which limits mobility! Nope, sorry, can’t move to where the jobs are or where you can go hiking on weekends, learn to love blooming where you are planted! It’s anti-democratic, anti-American, and really rustles my jimmies. Yes, nice lefties who say “newcomers cause gentrification, make them go away,” you are really saying Build The Wall.
There is some hypocrisy in how liberals are pro-immigrant but anti-transplant. The way people talk about techbros ruining everything is so reminiscent of how the right wing talks about people from shithole countries ruining everything. Otherism masked as righteousness.
I've been making the argument about luxury housing for years. It is expensive and slow to build affordable housing, and then there are bureaucratic hurdles to jump through. I'm not against it, but spending 8 years to build 50 units of affordable housing isn't going to solve the housing crisis. My argument has always been if a shitty apartment from the 70s is going for $3,000 a month, perhaps a brand new apartment going for a bit more will be more attractive to wealthy people in a situation where you have households making $500,000 a year competing with households making $100,000 a year. also, at $3,000 a month, that shitty 70s apartment is now unaffordable for a lot of folks.
Yes, exactly. The people who can afford the luxury apartment likely WILL say “an in unit washer dryer, and a dishwasher, and great views, and a gym onsite, etc. (whatever goes into luxury housing) is worth paying for.” Then they’ll upgrade and leave the 70’s cracker box apartment to someone who can’t afford better but still wants a roof over their head.
Three of the policy changes in Austin were specifically directed to increase the supply of below market rentals- making it easier to build accessory units, allowing buildings to be taller if they include units rented at below market prices and most significantly issuing hundreds of millions of dollars in municipal bonds to pay for affordable housing. Developers understandably build in order to make a profit and will not construct below-market units without policies that reward them financially for doing so (i.e. building taller buildings) or government subsidies (i.e. hundreds of millions of dollars in municipal bonds to pay for affordable housing). I agree there will be a trickle down effect which enables lower income families to move into newly vacant units but I suspect that will not be nearly enough to address the housing affordability crisis without government action to encourage and enable private developers to build a mix of market and below market units.
This piece was originally about twice as long and had a whole second section discussing inclusionary zoning policies, which aim to create below-market-rate units. That section ended up being spun out into its own piece. Need to do some reporting after exams, but hopefully it will be out soon.
I wish people didn’t just keep trotting out changes in Austin prices since December 2021 as evidence of something. Austin has a major confound with a bubble during the pandemic, when everyone wanted to move to the hippest blue city in a red state for their pandemic policy. It’s very hard to disentangle the supply story from the bubble bursting when focusing on this one city in this one time period.
Thats a good point. The value of my house in a bay area suburb is down about 25% from 2022, when everyone wanted to move to a single family home regardless of location, to now, when people need to be closer to silicon valley/san francisco. We've built some condos in my city, but those were online when my house was at its highest valuation.
I think this gets down to the why in terms of belief. Housing isn’t really fungible— there are different units with different characteristics at different price points.
Your typical person sees a glass high rise with $5K a month rent go up and doesn’t think that the person moving in to that unit is leaving behind a slightly crappier slightly less new high rise which rents at a slightly lower price, and that someone else
Is moving into that unit from somewhere else, and on down the line.
And the research even indicates that the way gentrification works makes the effect even less obvious. When a bunch of new buildings go up in an emerging neighborhood, rents in that neighborhood go up… but citywide rents also go down, because those units attract people from less trendy neighborhoods. But the vast majority of people don’t connect the dots from rents going up in Williamsburg to the rents going down in Alphabet City.
I ate at Rao’s once! Back in the early 2000s. It was delicious, but honestly there were about a thousand Italian restaurants in that part of New York that are just as good.
Well, I was a guest, so I didn’t pay. And it was 20 years ago! Rao’s is more like a private supper club than a restaurant. You sit down and they bring food. They don’t even bring a menu most of the time. It’s like your Italian grandmother having you over for dinner. It’s hard to get a reservation because there are families that “own” tables, and they will just go every Tuesday night. It’s definitely not like Per Se or a Michelin Star restaurant. I don’t think it’s $10, but the prices aren’t insane.
Italian food is inherently delicious, despite the efforts of Olive Garden. Just ask a New Yorker for their favorite Italian place and it probably won’t suck.
I think we might underrate the number of people in academia who are economically illiterate. People are natural story tellers and the stories around housing costs search for greedy villains. People are not naturally numerate and there are some very accomplished people who don’t even get the easy examples of supply and demand.
The thing about it being about income not supply constraints makes no sense. But when you have conversations with people who talk like this, you will often find no grasp of the actual numeric concept of supply and demand.
If there are more houses, more people will be able to live in them.
It’s interesting to see this. I’ve long believed that housing behaves in market ways and it’s nice to know that Austin shows some positive fruits here. I think one of the things that keeps people believing that its not a market is that it can only really go down so far because more room and dormitory style housing is straight up illegal in most of the country.
Like to get down to you can afford a place to live with your minimum wage job you really have to get into a whole different mode of housing than even apartments it appears to not really be a market. Like I live in Orlando and I see construction all over the place but it’s all sort of the same thing and yes filtering but actually you can raise your family here on the bottom rungs of the labor market isn’t something that you can just go get.
If someone imagines two scenarios and one of them is no new housing, and another is a bunch of luxury housing next door, it seems like the obvious answer to pick is that prices go up? I mean, for that person, the units they could move into now include more expensive units. the average unit that is available has a higher price. they could just be answering the question "do you think all these new units are likely to be expensive?" To the economist the only thing that matters is how your own home or existing homes' prices change, but that's missing the respondents' point I think.
The article is saying these respondents are just wrong, it's so easy to fix, all you have to do is... get sent to the bottom of a bigger, much richer market, wait for your turn in a chain of people ordered by wealth. That works, but it's actually not very popular!
The Pro-market Delusion at the Heart of the Homelessness Crisis
If increasing housing supply invariably brings rental costs down across the market, then homelessness in Austin should have decreased in the last decade because the city added 120,000 new units between 2015 and 2024. Many scholars and advocates argue that increasing the supply of housing is the primary solution to homelessness. But even as Austin dramatically increased its housing stock, per capita homelessness rose. Total homelessness rose about 60% during that period, while chronic homelessness–those who’ve been homeless for more than a year and live with a serious disability–more than doubled.
I agree that housing supply is a primary driver of homelessness, but drivers such as disability and addiction must also be addressed. In Austin there are now far more people with serious mental illness and addiction living on the streets than a decade ago. Part of the problem is zoning: few want chronically unhoused people living next door--even YIMBYs often draw the line at allowing homeless shelters or supportive housing developments in their neighborhoods.
In Austin, costs went down and chronic homelessness went up. You can’t upzone your way out of homelessness.
That's interesting. I'm curious where the homeless people are coming from - are they austinites for whom the modest decreases in rent are still too high? Was there some other system that broke during the same period that increased the number of homeless? Or have folks been coming to austin because it is known to be an easier place to live undisturbed if you are homeless? My suspicion is that the latter is a significant driver of homeless increases - folks know that certain cities/area are more likely to leave you alone and/or provide services, so they migrate to places like austin or san francisco.
Most of the people experiencing homelessness in Austin are local (pushing 70%), as is the case in most of the US. And Austin criminalized homelessness a few years ago—you can get arrested for sleeping outside. At last count, about 900 unhoused people were in jail in Austin, about a third of those incarcerated. Despite its liberal reputation, Austin is not a magnet for homeless people.
The percentage of the unhoused population that is chronically homeless (disabled and with a year of homelessness under their belt) rose substantially in Austin AND in Houston over the last few years. This is the subpopulation that is most difficult to house—the gold standard is to move people who are chronically homeless off the streets and into supportive housing (subsidized housing with services).
Austin built 120K housing units and has less than 500 permanent supportive housing units with not nearly enough in the pipeline to support the need. They’re screwed.
Houston has a growing population of difficult to treat and difficult to house people that will likely present an intractable problem in the next few years as resources are shifted from permanent supportive housing to emergency shelters. The days of holding Houston up as a as the model for “solving” homelessness are probably numbered.
Interesting. I'm most familiar with the bay area, where some cities absolutely are magnets for homeless people and where the cost of living is so high it exacerbates the problem. I wonder if the prevalence of more debilitating drugs has led to the increase of chronic homeless? I'm not in this population at all, but my casual observation from years of living in areas with a high homeless population is that fentanly is far more debilitating to people than heroin or methamphetamines were. Those were terrible, but fent seems to just take people out so much quicker and more intensely.
I think it is absolutely true that most people don’t believe supplying demand applies to the housing.
But I do not have a convincing explanation for why this is the case, nor have I seen one. If we could figure that out, it would help fix the messaging.
NYC has had a mandatory inclusionary zoning policy since 2016 requiring developers to set aside a portion of new units for low and moderate-income residents when their projects are located in areas rezoned for increased residential density. This policy has not made much of a dent in the city’s severe shortage of
low or middle income housing-maybe the requirements were too lax or the income limits too high.What did make a difference was the Limited-Profit Housing Companies Law (Mitchell-Lama). Developers receive tax abatements and low-interest mortgages subsidized by the government and are guaranteed a limited return in equity. There is an upper income limits for tenants and rents are set at below market rates. The program helped produce more than 130,000 apartments between the mid-1950s and the late 1970s in NYC alone. Thus, while market forces affect the construction of market rate housing, governmental subsidies or direct government construction are necessary for substantial development of low and middle income housing. Without government involvement, the market for low and moderate income housing are the tenements and deteriorated buildings in the city’s poor neighborhoods.
So I would need to see some studies on this, but I have a suspicion as to what is causing the supply and demand denial to kick in for housing.
In my personal life, I've noticed many people deny supply and demand for Healthcare as well. The idea that if we reduce diseases by 90% and also quadruple the number of Healthcare providers, the price of Healthcare services would not change at all. The people I have seen believe this are not stupid.
What I think is happening is that humans want problems to have easily identifiable villains. Healthcare and housing are definitely problems today. Because of that, people are defaulting to thinking there must be a "bad guy" out there causing it. I think this is why populism is so enticing as a political strategy as it plays into that natural tendency to blame problems on some specific out group (corporations, immigrants, ethnic minorities, etc.) Instead of systemic issues. Supply and demand unfortunately doesn't have some obvious villain that can be pointed out.
I would love these economists to try the same thing with Healthcare to see if my suspicion is correct and the supply and demand denial kicks in there as well. If anyone likes this comment, try it in your personal life and see what happens.
Yes! The need for "villians" is discussed in Elmendorf, Nall, and Oklobdzija (2025) — see Figure 3.
Ah yes I have read this paper before and now I see they did discuss that.
I think using the healthcare comparison is a good way to test the hypothesis that housing supply and demand denial is downstream of a need for a villain. After all, people absolutely are as angry about healthcare as they are housing. People aren't angry about cars, steel, or plumbing services so they accept supply and demand.
For me with a sample size of about 10, I only had 2 people accept that supply and demand applies to Healthcare services. Eerily similar to housing. Unfortunately I'm just one man so don't know if this generalizes. Would love if these economists did a paper on it as well.
All true, but the complication with healthcare is that the consumer (the patient) doesn’t usually directly pay for their healthcare. A single payer system doesn’t change that. What’s the incentive for quadrupling the number of providers? And what’s the mechanism for reducing the level of illnesses? If both could be an accomplished, perhaps healthcare would become affordable without the need for insurance. But unless that becomes a realistic possibility, I’m not sure it’s irrational to believe that the law of supply and demand has no practical application to healthcare.
Reducing prevalence of diseases:
- expand access to GLP1 medications to reduce incidence of obesity thereby reducing incidence of arthritis, diabetes, etc.
- automated vehicles reducing frequency of car wrecks thereby reducing number of people crippled.
Expanding number of providers:
- increase scope of services PAs and NPs can provide
- expand number of funded residency spots.
- lower required training to practice medicine
- allow more healthcare providers to immigrate.
These would place downward pressure on the cost of Healthcare services. Although due to price opacity and the insurance system, I concede it may be less than anticipated.
But supply and demand applies to the services of a dermatologist or a surgeon the same as it does the services of house cleaners and electricians.
Yup, the private equity boogeyman who’s buying up all this housing and then just sitting on it. People are fundamentally unserious about a lot of this stuff.
Activists in oakland have argued that what is causing homelessness is rich people and private equity sitting on 2nd and third homes and we don't actually need to build new housing at all.
From my experience, the people with the most power to block new housing (politically active homeowners) are the same group of people that do not directly experience the impact of new housing being blocked (they are locked into their mortgages and/or have paid them off) and do experience the negatives of building new housing (traffic, parking, change to the communities they've lived for decades). It is why california has had to override local control. There is no real incentive for homeowners to allow new construction.
Thats part of the housing crisis. Restricting construction has concentrated benefits but diffuse costs. My comment was about another issue behind the housing crisis, the widespread denial of supply and demand.
Both issues are part of why housing is such a mess.
There is a bad guy. The bad guys are the political leaders and the voters who pushed for onerous housing regulations.
The issue is no one wants to believe “I’m the bad guy.”
> almost impossible to get a reservation at Rao’s in New York City
That’s wild because they sell it in jars at the grocery store
Yeah. I know about this Rao’s stuff because Paul Freedman in the history department told me he went there. He said the food was alright but you’re mainly paying for the vibe + the flex of getting to say you got to go to Rao’s.
Anyways they apparently started selling the jarred sauce several decades (or maybe even a century) after the restaurant opened.
It's hella expensive but damn is it good. I look longingly at those jars at the store
I'm not sure how prominent the "transplant" discourse is anywhere else, but in NYC, my hometown and the place I plan to spend the rest of my life, it has become equal parts toxic and delusional.
It seems that large swaths of people, and many of them self-identified progressives, are absolutely convinced that the sole cause of housing prices spiraling out of control is people moving here from other places in the US.
Now, of course just like any other form of demand shock, yes, people moving to NYC will tend to increase housing prices ceteris paribus. But given that the NYC population has been stagnant-to-declining in recent years, this explanation collapses under the most basic form of scrutiny.
More importantly to me though is the fact that it seems like nothing but a deflection away from the actual most important cause: we simply do not build enough. Not for the natives, not for the "transplants," not for the poor, not for the working class, not for anyone. I mean, what is the solution the "transplant" haters even propose? Build a wall around New York City?
That would obviously unconstitutional, but even if we set that aside, have they taken a cursory glance at the data emanating from cities that can't attract new residents? You know all the things you like about New York City? The restaurants, bars, public transit system, etc.?
Guess what--they are dependent on economic growth, and that means you don't get to ban someone from Ohio who wants to come spend money in NYC from doing so. These folks tend to understand that Donald Trump's form of nativism is unethical and economically illiterate, yet they think if you just shrink the size of the polity in question all of the sudden his cockamamie economics pencil out.
I know this comment may seem unresponsive to the article, but I want to highlight that I think this discourse exists as a kind of rhetorical shield against grappling with our pitiful efforts to make supply meet demand.
Bludgeon "transplants" all you want (and by the way, the idea that native New Yorkers don't also move into neighborhoods that are economically and logistically convenient for them is laughable), but you can't have a thriving city solely on the backs of people born in particular zip codes.
To attempt to tie all my rambling together, in my experience the people who who engage in this tiresome discourse are also the first to complain about new development. I'd like to hear them articulate their Plan B for housing prices once they find out you can't actually stop your fellow American citizens from freely moving within the country.
I think this is a good comment, have some gold 🏅. I, too, hate hearing all the discourse around how “transplants” or “newcomers” ruined everything, driving out current residents and generally just not being as cool as long-timers. It really, really IS Trumpian nativism discourse writ much smaller.
Honestly I think there are progressives who secretly would love something like a hukou policy which limits mobility! Nope, sorry, can’t move to where the jobs are or where you can go hiking on weekends, learn to love blooming where you are planted! It’s anti-democratic, anti-American, and really rustles my jimmies. Yes, nice lefties who say “newcomers cause gentrification, make them go away,” you are really saying Build The Wall.
There is some hypocrisy in how liberals are pro-immigrant but anti-transplant. The way people talk about techbros ruining everything is so reminiscent of how the right wing talks about people from shithole countries ruining everything. Otherism masked as righteousness.
I've been making the argument about luxury housing for years. It is expensive and slow to build affordable housing, and then there are bureaucratic hurdles to jump through. I'm not against it, but spending 8 years to build 50 units of affordable housing isn't going to solve the housing crisis. My argument has always been if a shitty apartment from the 70s is going for $3,000 a month, perhaps a brand new apartment going for a bit more will be more attractive to wealthy people in a situation where you have households making $500,000 a year competing with households making $100,000 a year. also, at $3,000 a month, that shitty 70s apartment is now unaffordable for a lot of folks.
Yes, exactly. The people who can afford the luxury apartment likely WILL say “an in unit washer dryer, and a dishwasher, and great views, and a gym onsite, etc. (whatever goes into luxury housing) is worth paying for.” Then they’ll upgrade and leave the 70’s cracker box apartment to someone who can’t afford better but still wants a roof over their head.
Three of the policy changes in Austin were specifically directed to increase the supply of below market rentals- making it easier to build accessory units, allowing buildings to be taller if they include units rented at below market prices and most significantly issuing hundreds of millions of dollars in municipal bonds to pay for affordable housing. Developers understandably build in order to make a profit and will not construct below-market units without policies that reward them financially for doing so (i.e. building taller buildings) or government subsidies (i.e. hundreds of millions of dollars in municipal bonds to pay for affordable housing). I agree there will be a trickle down effect which enables lower income families to move into newly vacant units but I suspect that will not be nearly enough to address the housing affordability crisis without government action to encourage and enable private developers to build a mix of market and below market units.
This piece was originally about twice as long and had a whole second section discussing inclusionary zoning policies, which aim to create below-market-rate units. That section ended up being spun out into its own piece. Need to do some reporting after exams, but hopefully it will be out soon.
I wish people didn’t just keep trotting out changes in Austin prices since December 2021 as evidence of something. Austin has a major confound with a bubble during the pandemic, when everyone wanted to move to the hippest blue city in a red state for their pandemic policy. It’s very hard to disentangle the supply story from the bubble bursting when focusing on this one city in this one time period.
Thats a good point. The value of my house in a bay area suburb is down about 25% from 2022, when everyone wanted to move to a single family home regardless of location, to now, when people need to be closer to silicon valley/san francisco. We've built some condos in my city, but those were online when my house was at its highest valuation.
Yes there are two sides to a maket. Supply AND demand.
If you want affordability you either need to increase supply or decrease demand
I think this gets down to the why in terms of belief. Housing isn’t really fungible— there are different units with different characteristics at different price points.
Your typical person sees a glass high rise with $5K a month rent go up and doesn’t think that the person moving in to that unit is leaving behind a slightly crappier slightly less new high rise which rents at a slightly lower price, and that someone else
Is moving into that unit from somewhere else, and on down the line.
And the research even indicates that the way gentrification works makes the effect even less obvious. When a bunch of new buildings go up in an emerging neighborhood, rents in that neighborhood go up… but citywide rents also go down, because those units attract people from less trendy neighborhoods. But the vast majority of people don’t connect the dots from rents going up in Williamsburg to the rents going down in Alphabet City.
I ate at Rao’s once! Back in the early 2000s. It was delicious, but honestly there were about a thousand Italian restaurants in that part of New York that are just as good.
I’m curious if you don’t mind sharing: what were the prices like?
Well, I was a guest, so I didn’t pay. And it was 20 years ago! Rao’s is more like a private supper club than a restaurant. You sit down and they bring food. They don’t even bring a menu most of the time. It’s like your Italian grandmother having you over for dinner. It’s hard to get a reservation because there are families that “own” tables, and they will just go every Tuesday night. It’s definitely not like Per Se or a Michelin Star restaurant. I don’t think it’s $10, but the prices aren’t insane.
Italian food is inherently delicious, despite the efforts of Olive Garden. Just ask a New Yorker for their favorite Italian place and it probably won’t suck.
Delusion is a great way to describe it.
I think we might underrate the number of people in academia who are economically illiterate. People are natural story tellers and the stories around housing costs search for greedy villains. People are not naturally numerate and there are some very accomplished people who don’t even get the easy examples of supply and demand.
The thing about it being about income not supply constraints makes no sense. But when you have conversations with people who talk like this, you will often find no grasp of the actual numeric concept of supply and demand.
If there are more houses, more people will be able to live in them.
>> I think I’d probably cause at least three people to unsubscribe if I tried to explain instrumental variables in a footnote.
Surely this is exactly what footnotes are supposed to be for! Go for it!
It’s interesting to see this. I’ve long believed that housing behaves in market ways and it’s nice to know that Austin shows some positive fruits here. I think one of the things that keeps people believing that its not a market is that it can only really go down so far because more room and dormitory style housing is straight up illegal in most of the country.
Like to get down to you can afford a place to live with your minimum wage job you really have to get into a whole different mode of housing than even apartments it appears to not really be a market. Like I live in Orlando and I see construction all over the place but it’s all sort of the same thing and yes filtering but actually you can raise your family here on the bottom rungs of the labor market isn’t something that you can just go get.
I really need gift links so I can post these on Boulder NextDoor for rage bait.
If someone imagines two scenarios and one of them is no new housing, and another is a bunch of luxury housing next door, it seems like the obvious answer to pick is that prices go up? I mean, for that person, the units they could move into now include more expensive units. the average unit that is available has a higher price. they could just be answering the question "do you think all these new units are likely to be expensive?" To the economist the only thing that matters is how your own home or existing homes' prices change, but that's missing the respondents' point I think.
The article is saying these respondents are just wrong, it's so easy to fix, all you have to do is... get sent to the bottom of a bigger, much richer market, wait for your turn in a chain of people ordered by wealth. That works, but it's actually not very popular!
The Pro-market Delusion at the Heart of the Homelessness Crisis
If increasing housing supply invariably brings rental costs down across the market, then homelessness in Austin should have decreased in the last decade because the city added 120,000 new units between 2015 and 2024. Many scholars and advocates argue that increasing the supply of housing is the primary solution to homelessness. But even as Austin dramatically increased its housing stock, per capita homelessness rose. Total homelessness rose about 60% during that period, while chronic homelessness–those who’ve been homeless for more than a year and live with a serious disability–more than doubled.
I agree that housing supply is a primary driver of homelessness, but drivers such as disability and addiction must also be addressed. In Austin there are now far more people with serious mental illness and addiction living on the streets than a decade ago. Part of the problem is zoning: few want chronically unhoused people living next door--even YIMBYs often draw the line at allowing homeless shelters or supportive housing developments in their neighborhoods.
In Austin, costs went down and chronic homelessness went up. You can’t upzone your way out of homelessness.
That's interesting. I'm curious where the homeless people are coming from - are they austinites for whom the modest decreases in rent are still too high? Was there some other system that broke during the same period that increased the number of homeless? Or have folks been coming to austin because it is known to be an easier place to live undisturbed if you are homeless? My suspicion is that the latter is a significant driver of homeless increases - folks know that certain cities/area are more likely to leave you alone and/or provide services, so they migrate to places like austin or san francisco.
Most of the people experiencing homelessness in Austin are local (pushing 70%), as is the case in most of the US. And Austin criminalized homelessness a few years ago—you can get arrested for sleeping outside. At last count, about 900 unhoused people were in jail in Austin, about a third of those incarcerated. Despite its liberal reputation, Austin is not a magnet for homeless people.
The percentage of the unhoused population that is chronically homeless (disabled and with a year of homelessness under their belt) rose substantially in Austin AND in Houston over the last few years. This is the subpopulation that is most difficult to house—the gold standard is to move people who are chronically homeless off the streets and into supportive housing (subsidized housing with services).
Austin built 120K housing units and has less than 500 permanent supportive housing units with not nearly enough in the pipeline to support the need. They’re screwed.
Houston has a growing population of difficult to treat and difficult to house people that will likely present an intractable problem in the next few years as resources are shifted from permanent supportive housing to emergency shelters. The days of holding Houston up as a as the model for “solving” homelessness are probably numbered.
Interesting. I'm most familiar with the bay area, where some cities absolutely are magnets for homeless people and where the cost of living is so high it exacerbates the problem. I wonder if the prevalence of more debilitating drugs has led to the increase of chronic homeless? I'm not in this population at all, but my casual observation from years of living in areas with a high homeless population is that fentanly is far more debilitating to people than heroin or methamphetamines were. Those were terrible, but fent seems to just take people out so much quicker and more intensely.
I think it is absolutely true that most people don’t believe supplying demand applies to the housing.
But I do not have a convincing explanation for why this is the case, nor have I seen one. If we could figure that out, it would help fix the messaging.
NYC has had a mandatory inclusionary zoning policy since 2016 requiring developers to set aside a portion of new units for low and moderate-income residents when their projects are located in areas rezoned for increased residential density. This policy has not made much of a dent in the city’s severe shortage of
low or middle income housing-maybe the requirements were too lax or the income limits too high.What did make a difference was the Limited-Profit Housing Companies Law (Mitchell-Lama). Developers receive tax abatements and low-interest mortgages subsidized by the government and are guaranteed a limited return in equity. There is an upper income limits for tenants and rents are set at below market rates. The program helped produce more than 130,000 apartments between the mid-1950s and the late 1970s in NYC alone. Thus, while market forces affect the construction of market rate housing, governmental subsidies or direct government construction are necessary for substantial development of low and middle income housing. Without government involvement, the market for low and moderate income housing are the tenements and deteriorated buildings in the city’s poor neighborhoods.